IMF: the main risk of the economic environment is deflation, that might complicate recovery attempts

The economic environment currently faces a deflationary risk, that would complicate any crisis recovery attempts, IMF President Dominique Strauss – Kahn declared on Wednesday, quoted by AFP.

On the short term, the main risk is deflation, Strauss – Kahn said, when prompted by the Spanish daily El Pais what is the impact of price decreases in both Europe and US. He explained that deflation is a risk that will further complicate the recession and any recovery measures.

The paradox, he said, is, that once the crisis is over, economies could face a new inflationary risk due to current policies to unlock liquidities on the market. Deflation,a sustained decrease in the general price level of goods, is considered unsuited for the economy by experts who agree that it might affect many countries.

According to a Standard & Poor’s report, Great Britain, Ireland and Spain are most threatened by a deflationary wave in Europe.